After posting solid activity for the three months prior to June, pending home sales have cooled modestly amid pressure brought on by seasonal factors and a shrinking affordability of homes in Southern California.
According to the National Association of REALTORS®, pending home sales are down countrywide based on the Pending Home Sales Index, which is a forward-looking indicator based on contract signings. On the national level, pending home sales slid by 1.1 percent to 102.7 in June from 103.8 in May. The current value of pending home sales based on contract data also notched a 7.3 decrease in year-over-year trends.
More locally, California pending home sales fell 2.8 percent from 110.1 in May to 107 in June. Yearly figures fell slightly more significantly by a figure of 5.9 percent.
As some remain skeptical of the recovery that is reportedly taking place, these values reflect a loss of distressed properties on the market that had skewed numbers in falsely favorable directions in past years. In California, equity home sales were up from 89.2 percent in May to 90.3 percent in June. Over the last year equity sales rose almost 10 percent from 79.7 percent in June 2013. While the inventory of available homes continues to be a huge factor in the grand scheme of things, this marks a significant turnaround for the market as distressed properties are not as much of an influencing factor.
“Activity is notably higher than earlier this year as prices have moderated and inventory levels have improved,” said Lawrence Yun, chief economist of NAR. “However, supply shortages still exist in parts of the country, wages are flat, and tight credit conditions are deterring a higher number of potential buyers from fully taking advantage of lower interest rates.”
Southern California Distressed Housing Market Posts Big Losses
Even as Southern California home prices continue to edge farther and farther out of reach of home buyers, foreclosures and short sales continue to post huge losses across the counties of Southern California. All six counties posted serious decreases in single-family distressed home sales in year-over-year data, with the most significant loss noted in Los Angeles that went from 21 percent in June 2013 to 10 percent in June 2014.
Many Southern California home owners have been thankful for the tremendous home price increases the region has seen over the last few years as their homes have been pulled from the brink of foreclosure or short sale thanks to a return in equity. With rising rent prices and an ever-improving housing market, Yun hopes this will help to spur further activity in the months to come.
“The good news is that price appreciation has decreased to its slowest pace since March 2012 behind much needed increases in inventory,” he said. “With rents rising 4 percent annually, potential buyers are less likely to experience sticker shock and can make smart decisions on whether or not it makes sense to buy or continue renting.”
With a strengthening local housing market and a selection of exquisite luxury properties, Southern California is an idea place to search for your dream home. Please contact us with any luxury real estate questions you may have today!